Ukraine: EU business loses transparency?


DEPECHE,  Europe correspondent

In the aftermath of the EU-Ukraine Summit the bilateral relations stay in focus, namely activities in trade, reminding Europeans that the co-operation is not one way street. The EU companies are expected to become models for business dealings, which today is not always the case.

The National Anti-Corruption Bureau of Ukraine (NABU) has started the pretrial investigation of the scandalous tender for dredging in ‘Yuzhny’ sea port. After it became clear that in the tender process the winner – the administration of the big Belgian ‘Jan De Nul’ company – had transferred controlling interest to two companies in Cyprus, and their ultimate beneficiaries had been hidden, the competition was declared doubtful and corrupt.

In response to the request of Sergey Leshchenko, a Member of Parliament of Ukraine, the NABU informs that in the course of the investigation criminal case will be initiated against the officials of the state enterprise ‘Ukrainian Sea Ports Authority’, who presumably are responsible for the non-transparency of the tender and the involvement of an offshore company.

Let us remind you, that 1.2 billion hryvnias (almost 50 million dollars) tender for access channel and berth №5/№6 dredging in ‘Yuzhny’ sea port was announced at the beginning of 2016. The ‘Jan De Nul Ukraine’ company has got the victory. However, right after the name of the winner was declared, it became obvious that the other participants of the competition offered much more beneficial conditions. But nevertheless the officials have chosen the most expensive one, having disqualified the other companies, who could compete the winner.

Ihor Tynynyka, a director of one of the enterprises, which also took part in the competition stated that his company proposed to execute dredging in 6 months and it would also cost 90 million less unlike the ‘Jan De Nul Ukraine’ company that needed 29 months for the same process.

‘The tender has been pre-planned. Another company has been chosen on purpose. There were three propositions available and the customer ‘Ukrainian Sea Ports Authority’ has chosen the most expensive one. We think that the tender procedure was not transparent. It did not meet the requirements of the anti-corruption legislation. We need to hold this tender all over again using the system called ‘ProZorro” – Ihor Tynynyka said.

Sergey Leshchenko, a Member of Parliament, believes that the Belgian company ‘Jan De Nul Ukraine’ has been involved in this scandal because of the total corruption in ‘Yuzhny’ Odessa sea port. What is more, it has been used in political bargaining between the members of the parliament coalition. But at the same time the Member of Parliament cannot understand how the parent company could allow this situation to happen, when its interests were represented in another country by the company with shady business structure and concealed ultimate beneficiaries. It completely contradicts the principles of the transparency of the European business.

On November, 21 the Prime Minister of Ukraine Vladimir Hroisman ordered to cancel the tender for dredging in ‘Yuzhny’ sea port and hold a new one using the system of the state procurement called ‘ProZorro’. According to Sergey Leshchenko, a Member of Parliament, after making this decision huge pressure was put on the Prime Minister: ‘After Hroisman had given a mandate to cancel this tender, political pressure was put on him by the parliamentary fraction ‘Narodniy Front’ which is a partner in the coalition. ”Narodniy Front’ said that Hroisman had committed treachery. The Prime Minister has been accused of ruining the agreement concerning the tender. And if he keeps doing it, then ”Narodniy Front’ will bring up a subject of quitting the coalition’- Leshchenko said.

The involvement of the parliamentary fraction ”Narodniy Front’ in the corrupt scandal concerning dredging in ‘Yuzhny’ sea port gained publicity after some changes concerning the ‘Jan De Nul Ukraine’ company were made in the State Register of Legal Entities and Individual Entrepreneurs of Ukraine. Andrei Ihorevich Rozov, a former assistant of Sergey Faermark who is a Member of Parliament representing ‘’Narodniy Front’, has been appointed as director and signatory of the company since July 8, 2016, which was after the declaration of the tender. In the course of the competition the ‘Jan De Nul Ukraine’ company has also changed the founding members transferring 55% of its shares to two Cyprus companies: ‘Medit Consortium Dredging Company Limited’ and ‘Havoret Invetsments Limited’. According to the Ukrainian legislation the participation of the companies with offshore founders is forbidden. But the authority of ‘Yuzhny’ sea port says that Cyprus is not an offshore zone because recently it has joined the European Union. At the same time Ukrainian officials are withholding the fact that the shareholder of one of the Cyprus founders of the ‘Jan De Nul Ukraine ‘ company is a structure called ‘ Tyron Business Holding Corp.’ registered in the British Virgin Islands, which does not reveal the information about the ultimate beneficiaries. This way the ‘Jan De Nul Ukraine’ company has lost its transparency and according to Sergey Leshchenko it has tied itself with influential Ukrainian officials and in particular with some representatives of the fraction ”Narodniy Front’ through offshore schemes.

It is important to pay attention to the fact that in Ukraine Cyprus is still considered to be an offshore zone, in spite of the agreement which was signed to avoid double taxation. The President of the Analytical Centre Alexander Okhrimenko points out that by all accounts Cyprus still belongs to an offshore zone, despite not being in the black list of offshores made by the Cabinet of Ministers of Ukraine. ‘Cyprus is considered to be an offshore zone everywhere. Though at the moment some changes are going to take place in the legislation, after which since 2019 the island will not be an offshore zone anymore’ – the expert explained.

At the moment we know that the scandalous tender will be held for the second time. Though the participants of the cancelled competition are sure it will not be different from the first one, and will involve serious violations. According to Ihor Tynynyka, it is more likely that the Netherland company ‘Van Oord’ will not take part in the repeated tender for dredging in ‘Yuzhny’ sea port . At the same time he is sure that the winner of the first competition the ‘Jan De Nul Ukraine’ company will for sure be among the participants and it will be again ‘chosen’ to be the winner. ‘I think that the ‘ Jan De Nul Ukraine’ company will take part for sure. It will be another corrupt tender. Nothing is going to change’ – Ihor Tynynyka states confidentl.

The authority of ‘Yuzhny’ sea port still does not reveal whether the ‘Jan De Nul Ukraine’ company has applied for participation in the repeated tender for dredging. Meanwhile, the investigation conducted by the NABU can significantly change the plans of the presumable winner.

This case has to alert the European society. Because in many cases European companies with popular brands, that have been working fairly and transparently in EU, after coming into Ukraine turn into corrupt crime partners. In reality to win a Ukrainian tender fair and square and in accordance with the law is almost impossible even for a company which is known worldwide. But the following question still stands:

How much will cost such a victory for the reputation of the ‘Jan De Nul’ company?…

Europe correspondent

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